Life in the Rioja wine district of Spain

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Monthly Archives: August 2010

The 2010 harvest in Rioja is set to begin. The latest buzz in the region is about the excellent condition of the grapes in the vineyards on the one hand and anticipation about the results of the Regulatory Council’s decision to reduce yields of red grapes by 10%, which, together with an increase in sales of 16% in the first six months of 2010 and an increase of 6,5% in the last 12 months could bring supply in line with demand.

As I’ve explained in the past, the best indicator of the general ‘health’ of Rioja wine is the inventory to sales ratio. The ideal ratio is a level of inventory equivalent to between 2,8 and 3,2 years of sales. If it’s lower than 2,8, there aren’t enough grapes and wine to go around and prices rise, while if it’s higher than 3,2 prices fall.

The ratio in 2009 was 3,54 and grape prices plummeted from an average of 80 euro cents to 55 euro cents (according to the Grupo Rioja) to 40-45 according to representatives of farmers’ unions. One big winery in Haro paid 38 cents a kilo which was undoubtedly good for its balance sheet but extremely bad for customer (that is, grape farmer) relations.

In 2010, an increase of 8% in sales and a decrease in production to 260 million liters could bring the ratio back to 2,76 which in theory would mean higher grape and wine prices. I’m sure this is the argument that prevailed in the Regulatory Council (the measure passed with 175 votes out of 200). Will grape and wine prices return to their previous level? The farmers doubt it – they’re planning a demonstration on September 11 – and so do I.

The plain and simple fact is that the average ex-cellars prices of Rioja have decreased steadily since 2000 and the wineries can’t afford to pay an average of 80 euro cents for a kilogram of grapes when their margins are being squeezed by customers in Spain and abroad. The reason sales are beginning to increase is lower winery prices with more comfortable margins along with the weak euro with respect to the dollar (1,27 now compared with over 1,40 throughout 2009) that is helping sales to the USA.

A lot could happen before the end of the year. First of all, September is traditionally the ‘make or break’ month for a Rioja harvest. Warm, sunny days and cool nights are important. Early rain could make for a major quality problem. Secondly, the timid economic recovery in most of Europe and the USA could sour.

I remain optimistic, however. We always learn from our mistakes and a major one last year was squeezing the farmers too hard on price. Since wineries have no choice but to buy grapes and wine from farmers and coops in Rioja, long-term relationships take precedence over short-term economic considerations. Grumbling is a highly developed political art form in Rioja but wineries and farmers have no other alternative than to get along. Wait and see.

Once in a while I come across a brand that doesn’t exist any more and it always makes me wonder why the winery decided to stop making it. In this case, the brand was ‘La Finca’ de Campo Viejo, which brought a smile to my face because of my long association with the winery as a former export director.

Although the back label didn’t say much about the wine – nothing about the grape varieties or serving suggestions, just a tasting note, I tried to imagine what the wine was about based on my knowledge of the history of the winery.

It was founded in the late 1950s by three businessmen: José Ortigüela, Bernardo Beristain and Juan Alcorta. Ortigüela was the wine guy of the trio, coming from the village of El Villar de Arnedo before moving to San Sebastian. ‘Campo Viejo’ was a vineyard in Rioja Baja, I suppose in El Villar or Tudelilla, which in those days was probably planted to garnacha like most of the area, to be blended with the tempranillo of Rioja Alta and Alavesa.

Campo Viejo was part of the SAVIN group of wineries, whose core business was to vinify, blend and bottle table wines from all over Spain and sell them, both in bottle and in bulk to customers in Spain and abroad.

Campo Viejo’s success stemmed from the fact that it was created as an inexpensive Rioja brand m eant to be sold primarily in supermarkets, a new type of food distribution in Spain, at a time when most Riojas were sold almost exclusively in restaurants.

In my opinion, another reason for the brand’s popularity was that the basic wine in the range was a crianza, complemented by a reserva, a gran reserva, a white and a rosé. The unaged red was sold under another label, Castillo de San Asensio. When I worked for SAVIN, we aggressively pushed the idea of crianza and the fact that Rioja was best when aged in a barrel. San Asensio was sold internationally to distributors or supermarkets at low prices, while Campo Viejo had a healthy advertising and promotional budget. Other wineries such as AGE and Berberana mimicked this policy with Siglo and Carta de Plata (this last brand sadly has almost disappeared from the marketplace due to misguided, short term thinking by the current owners of the company).

More aggressive sales and marketing tactics by newer Rioja wineries eager to find a place in the market and seesawing grape prices have given young red Riojas more prominence today but I can’t help but wonder what would have happened if Rioja had stuck to the philosophy of oak aged wines at the expense of volume in the 1990s.

Why did ‘La Finca’ disappear? I’m not sure but imagine that it was either an unsuccessful line extension or was a victim of the change of ownership when Allied Domecq sold the winery to Pernod-Ricard. In any case I really liked the wine. It showed ripe red fruit, depth and had a long finish. I hope I can find some more.

The other day I was reading the paper in the bar next door to my house. The following headline caught my eye: ‘The maximum temperature in La Rioja will increase six degrees at the end of the century, the same as the rest of Spain’. One of my buddies, a journalist who writes about wine, dismissed the article as filler in a month when not much else was happening.

This comment got me thinking about the potential consequences for the Rioja wine business as well as the nonchalant attitude of most people in the trade around here to climate change, an attitude that was familiar to me when I was director of the exporters’ association.

I looked around in the internet for a chart showing grapes and temperature that I had seen at a presentation in South America. When I found it, my suspicions were confirmed: a big increase in temperature meant that in the future, Rioja could be too warm for the tempranillo grape. According to this chart, tempranillo is one of the few grapes that seems to thrive in cooler climates, with pinot noir being the coolest. There are a number of varietals that like warmer weather than tempranillo (cabernet franc, merlot, malbec, syrah, cabernet sauvignon, sangiovese, garnacha, carignan (our mazuelo), zinfandel and nebbiolo.

I’m not an agronomist, but it seems to me that Rioja has several alternatives if the temperature really does increase:

Plant at higher altitude

Pick earlier

More leaf canopy to protect the vines from the sun

Authorize new red varietals such as the ones suggested in the chart

In my opinion, these changes are possible as long as the future Rioja Regulatory Council recognizes that a problem exists. However, Spain is a nation of followers rather than leaders. One of Spain’s greatest philosophers, Miguel de Unamuno, summed this attitude up with his famous phrase “que inventen ellos” (let others invent). My tenure as the director of the exporters’ association was sometimes frustrating because of the wineries’ and growers’ reluctance to look ahead, preferring to wait until reaching the point of no return to make decisions.

I think that in the last ten years, Rioja has actually benefited from warmer weather – a longer growing season that has produced fully ripe grapes, even in Rioja Alta and Alavesa, where in the past, potential alcohol often only reached 9%, and the relative absence of spring frost. However, the newspaper article leads me to believe that this positive trend could turn negative if the temperature continues to rise. I hope the right decisions are made before it’s too late.